How to build your Real Estate Company with Mike Simmons (CFFL 0011)

How to build your Real Estate Company with Mike Simmons

Jack Butala:                   Today’s guest, Mike Simmons of, says this from his bio, “I started my real estate career investing a few years back, and since then I’ve done several very profitable real estate flips. Along the way, I’ve learned a lot and get approached all the time by new real estate investors who have questions about real estate investing.” Hey, that’s exactly what the show is all about. “I’ve helped a lot of them, but I noticed a real lack of good real estate advice in the industry,” except for Land Academy. “Most of my experience is in flipping houses, and I have also been a landlord, investing properties to overseas investors as well as a few other types of real estate investments. I’m here to help you and avoid some of the mistakes that I have made.” Mike, welcome to the show.

Mike Simmons:                 I am very happy to be here. Thanks for having me. That’s really cool.

Jack Butala:                   In our little pre-talk, you let me know that you’ve got your own podcast. It’s such a relief, because we’ve been interviewing people in a pretty good high-paced rate lately. I think some of them, it’s the first time they’d ever talked on the telephone before.

Mike Simmons:                 Yeah, I know. I get that a lot too. That’s why I suggested we went this [raw 00:01:51], because I knew you had the equipment to make it sound a little bit better, better than a phone call for sure.

Jack Butala:                   Let’s learn a bit about your company before we get into our interview.

Mike Simmons:                 Okay, will do. My company is evolved. I have done what I preach to people for years to do, and that’s, look at your market, figure out what’s working in your market, and adapt your business so that you can be successful. I started off as a house flipper in ’08, which was like the apocalypse of real estate time, except for investors. Honestly, if you take away all of the hardships that people went through, and just look at it purely from an investor’s standpoint, I wish it would happen again. I don’t want people to be displaced and all that, obviously, but from just a purely investing standpoint, greatest time ever to get involved.

It was hard for me to get involved at the money that houses were being bought and sold at, and then everything dropped off, it was a lot easier to get in the game. That’s how I started as a flipper, and I did that for about six years pretty steady. I was pretty successful at it, and then the deal started drying up a little bit. I got all my deals off the MLS, through a realtor. He wasn’t bringing me deals anymore. He wasn’t able to find them. I would go to events, and local meetups, and things, and talk to a lot of friends I had made in the industry who were also real estate flippers, and they had the same complaint, “Can’t find any deals. Can’t find any deals, it’s drying up. It’s drying up. I used to do 30 deals, and now I’m lucky to do 10.” It was the same thing no matter who I talked to. They couldn’t find deals.

I knew I was looking for deals the same way they were looking for deals, and they were looking for deals the same way I was. It just occurred to me how, the definition of insanity, keep doing the same thing over and over, and expect different results. I decided, “I’ve got to do something different. I have to take control of this. I’m sick of waiting for a realtor to bring me deals that they find.” I started doing my own marketing, and the deal started coming. I started flipping them, and then the deal started coming a little bit higher volume. It started to overwhelm me, so I said, “I know a lot of people that want to flip houses just like me. I’m going to give them a call and see if they’ll take this one on.”

I called them up and, “Hey, Joe. I got this deal …” I knew in my head that I got it for $90,000. I said, “Hey, I got this deal for $105,000. Do you want it? Here’s the numbers,” and they were like, “Yeah. That’s great. That’s awesome. I love it. I’ll take it.” $15,000 assignment later, I said, “Hey, that was pretty easy. That wasn’t too hard.”

Jack Butala:                   That’s the definition of wholesaling.

Mike Simmons:                 Yeah, exactly. I won’t go into the long detail, but slowly, I started turning over to doing more and more wholesaling until now. I am pretty much all wholesaling completely. No more flipping, really, anymore. I’m doing all wholesaling, because in my market, everyone is dying for deals. They just can’t get enough of them. I literally get something under contract. If I would do it, I know I can find someone who will do it in no time.

Jack Butala:                   We are right on the same page. It is so refreshing to have a podcast with somebody who is in the real estate business.

Jill DeWit:                            I bet that was a joke at me, and [poking 00:04:55] me with the [crosstalk 00:04:56].

Jack Butala:                   No, I wasn’t at all, Jill. You are in the real estate business, right? [crosstalk 00:04:59] [chat 00:05:00] each other. We’ve been speaking with some people who are very successful at other stuff, and it’s nice to talk to somebody … What’s the secret? How do you keep your pipeline full?

Mike Simmons:                 I’ll tell you what; I keep the pipeline full … I’ll be honest with you. When I started wholesaling, I didn’t really mean to wholesale, and I wasn’t really a good marketer at all. I just talked to a local wholesaler in my market, a friend of mine, and I said, “What do I do? How do I get this going? I want to start marketing, and I really don’t know where to begin.” He gave me some basics. He said, “I throw a couple hundred of post cards out there. If you do more than 200, it’s going to get overwhelming for you.” I said, “Okay,” threw a few hundred out, and over the couple of months, I gradually increased a little bit at a time, and started doing deals. It occurred to me that this is a formula, and it’s a pretty predictable formula. The more you market, the more deals you get.

Jack Butala:                   That’s it!

Mike Simmons:                 If $800 a month is going to produce one deal, what if I did $5,000 a month? What if I did $10,000 a month? Our marketing started ramping up, and we were basically taking a machine gun approach. “I’m going to throw tons of marketing. When it comes back in, I’ll use that money to reinvest in my business.” We did a lot of marketing. To answer your question directly, we keep it full by doing a ton of marketing. Now I’ve gotten to the point in my business where I’m not happy with the volume that I’m getting just through marketing. It’s the same volume I’ve been getting, but I want to grow. How do I grow? You’ve got to come up with other avenues.

We’re starting to investigate smarter marketing, and then additional ways to get things in the pipeline, other than just straight marketing.

Jack Butala:                   What have you come up with so far?

Mike Simmons:                 There’s a lot of ways. I spoke to someone recently who is extremely successful with bandit signs, and got his tricks of the trade. We started that. I started out the same way I did with marketing. Just a couple hundred bandit signs, no big deal. We’re already going to do a couple of deals off that that’s going to pay for my bandit signs for the next year. I started with 200. My next order was for 1,000. We’ll see how that goes. The next order will probably be for 3,000 to 5,000. I’m a very impatient guy. When I see something that works, I go, “If it works at this level, what if I 10 times that, what will happen?” That’s how I approach things.

Jack Butala:                   You’re the kind of guy who probably pushes it until it explodes, right? Like me?

Mike Simmons:                 Yeah, pretty much. I push it until it explodes, and then I throttle back and go, “Wow, that was pretty fun. Let’s see what I did wrong here to try to fix it.” That’s kind of where I am with my marketing. We’re pushing out about 15,000 mail pieces a month. It’s great, but I think there’s a little bit of diminishing returns, so we’re going to start maybe throttling back just a little, and use some of that extra money into other avenues, and see if we can figure out another stream of deals coming in.

Jack Butala:                   You know what? I did a couple of years ago, from a marketing perspective, exactly what you’re talking about here that paid off in spades. You have to do it in the right neighborhood. There’s a lot of handymen and guys with pickup trucks, and they all would love to have those side-rails in the side of their trucks, if you can picture those wooden rails. I [had ingressus 00:08:20] and I said, “I’ll pay for your side-rails, but you’ve got to put them up with my phone number on it and my message,” and men, I got overwhelmed. It cost like $300 or $400 to get those rails.

Mike Simmons:                 Really?

Jack Butala:                   Yeah, feel free to use it. Again, this kind of working and is super high in market. We got tons, and tons, and tons of calls from that, and still get calls, actually.

Mike Simmons:                 No kidding. Did the handymen themselves get [bambado 00:08:45] people walking up to them …

Jack Butala:                   Yeah.

Mike Simmons:                 … Trying to find out … Okay.

Jack Butala:                   He got business from it too, because the guys that are walking up saying all that stuff … It works out great for everybody.

Mike Simmons:                 That’s awesome. I love that. That’s a great idea. That is truly unique. I’ve never heard that one before.

Jack Butala:                   Good. Try something like that and let us know. I’d love to see … Jill and I are in the land business exclusively now, because I don’t have the patience for housing, but we do the …

Jill DeWit:                            Or the stomach for it.

Jack Butala:                   We do a different version of the exact same thing. We just kill it with mailers. The other thing too with houses is I kept our mailing list to people who don’t have a mortgage associated with their property, and our success percentages went through the roof, because they can [we on deal 00:09:38].

Mike Simmons:                 Yeah, absolutely. It’s funny, I learned a little bit from a guy named Tom [Crawler 00:09:45] … I don’t know if you know him, [down or 40 00:09:46]. He is a wholesaler. He told me … I still use it to this day, and I swear by it. He markets to equity, regardless … I know this is housing, right? We’re not talking about land. We’re back in the housing, but he markets to equity and age. They have to give a certain amount of equity or free and clear and age. In my experience, I rarely buy houses from anyone under the age of 45.

Jack Butala:                   Excellent.

Mike Simmons:                 Typically, they don’t have the equity, right? I mail the equity and age, and it’s going phenomenally well.

Jack Butala:                   Without actually phrasing it that way, Jill, I think that’s exactly what we do. The vast majority of the calls that we get or the properties that we purchase are from people who are over the age … They’re not going to use the property anymore, and they’re just ready to check it off their list. It gives us a lot of negotiation power.

Mike Simmons:                 Absolutely.

Jack Butala:                   Great, men. I’m going to run through couple of interview questions.

Mike Simmons:                 Let’s do it.

Jack Butala:                   What was the first deal you did, and how much out-of-pocket cash did it take?

Mike Simmons:                 First deal that my wife and I did was in ’08. Bought a little property here in Michigan. We spent $40,000. We financed it through a traditional mortgage, a mortgage company. We took our own personal money and did the rehab. “Our personal money” meant money that we had in the bank, which wasn’t nearly enough to do the rehab, credit cards, lines of credit. We just pushed all our chips in the middle of the table, pretty much. If that didn’t work, it was going to be a real miserable marriage for a lot of years. I was the one driving this. My wife is very conservative, but she was definitely on board, all in, excited.

She had trouble sleeping at first, because it was so scary for her. We did this. We pushed our own money, and we spent $15,000 on the renovations. We spent $40,000 on the house, and at the end of the day, we ended up selling for around $80,000, and had a net profit, after everything was said and done, of about $15,000. You would have thought it was like 15 million. We were freaking out. She went from saying, “I don’t know about this,” to, “When is the next one? Find the next one. Let’s do this.” That was Jessica.

Jack Butala:                   You got the right wife.

Mike Simmons:                 Yeah, she is awesome. I guess it’s super conservative. I can tell you this; had we lost our money, it would have went completely the other way. It would have been, “Oh no, you’re not.” It was good that it went well, obviously. We had a lot of luck in a lot of hard work. We really haven’t had too many hurdles or challenges. I’m a really aggressive risk taking kind of guy. She’s a good complement to me, because sometimes I get ahead of myself, and she’ll go, “Wait a minute. Think about this for a second.” When I do, usually, she is right. I go “Okay, you’re right. I’ll calm down.” After we did that first one, or during that first one actually, we started … We had a mentor, a local guy here in our market who was very successful. He would informally give us some advice.

He is like, “You need to talk to everybody you find. Everybody you run into, tell them what you’re doing. Really broadcast what you guys are up to in this first flip, even before you’re done. Talk about it. Get online, Facebook, everything.” We did that. Just from all of that talking, and just meeting people, and telling them what we were up to, we had people approach us before we finished that first deal, and said, “Hey, we really like you guys. We like what you’re doing. You seem like great, nice, honest people. We want to get involved. We’ve got some money we’d like to invest your next deal.” From there, we’ve never spent a dime of our own money.

Jack Butala:                   Oh my gosh, what a story!

Mike Simmons:                 Yeah, it worked out well. This is sort of like … Don’t feel too bad for me, but we got to a point where the money that we had available to us was growing faster than the deals that we were finding, even in the good time where you could find deals all over the place. We had so many people, word of mouth, and things, and just us being very vocal, that we had people approaching us, and we had to say, “We would love to work with you. Right now, we don’t have the deals available to use your money.” It’s a great problem to have, but we worked so hard at raising money that it became bigger than our ability to find deals.

Jack Butala:                   Here is the message that we send at Land Academy day in and day out; if you are sourcing and locating on a valued real estate, you’re going to win. There’s tons and tons of money that money will find you. I you’re buying an asset that’s worth 125,00 bucks for $90,000, you’re going to win. Spend the time on the marketing piece. We don’t [call it 00:14:14] marketing. We are a huge direct mail fans here, and we actually send out offers. We don’t horse around. We say we’re going to buy a property for X, and that’s it.

Mike Simmons:                 No kidding.

Jack Butala:                   Yeah, with a signature block at the bottom. It is amazing the number that we get back where they just sign it. We don’t blindly send out … We do a lot of homework before it gets into our database to even send it out as an acquisition candidate.

Mike Simmons:                 That’s a good idea.

Jack Butala:                   Sounds like we have a lot in common. I’m from Michigan too.

Mike Simmons:                 Are you really? What part? This is going to bore everyone, but I’m curious.

Jack Butala:                   I grew up at [inaudible 00:14:48], but ultimately graduated from high school in Grosse Pointe.

Mike Simmons:                 No kidding! I live … Here we go, everyone [inaudible 00:14:56].

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